ANTHONY ERIC RYAN HOTUNG v. HO YUEN KI

HCMP 1956/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1956 OF 2009

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BETWEEN

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J U D G M E N T

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Cheung JA:

1.  I agree with the judgment of Barma J.

Yuen JA:

2.  I agree with the judgment of Barma J.

Barma J:

3.  This was an application by Anthony Eric Ryan Hotung, the Plaintiff in HCMP 2701/2005 and Respondent in CACV 178/2006 (“the Plaintiff”), seeking to commit Madam Ho Yuen Ki, the Defendant and the Appellant in those proceedings (“the Defendant”), for contempt of court arising out of her alleged failure to comply with the order of the Court of Appeal made on 10 July 2007 in CACV 178/2006.  The application was brought with the leave of the Court of Appeal (Yuen JA and Barma J) given on 25 September 2009 following an inter partes hearing for leave to issue committal proceedings against the Defendant.

4.  The Plaintiff is the beneficiary of two trusts of which the Defendant is trustee.  The settlor of the trusts was the Plaintiff’s now estranged father, Eric Edward Hotung (“Hotung Senior”).  The trusts were established by Hotung Senior in 1979 and 1980.  The other two beneficiaries of these trusts are the Plaintiff’s brothers, Sean and Michael Hotung.  Under the first trust, the Defendant holds 10,000 shares in a company called Hotung Enterprises Limited (“HEL”), holding 3,334 shares for one of the beneficiaries and 3,333 shares for each of the others.  HEL has a total of 20,000 issued shares.  Under the second trust, the Defendant holds three shares in a company called Hotung Investment China Limited (“HICL”).  HICL has a total of 100 issued shares.  The Defendant was also for a time (but is no longer) a director of HEL and HICL.  Similar trusts were set up by Hotung Senior for three of his daughters, Mara, Gabrielle and Sheridan Hotung, with a company called Hillhead Limited acting as trustee of those trusts.

5.  The Plaintiff has, for many years, been seeking to inspect documents belonging to HEL and HICL, which he believed at one stage held substantial assets.

6.  As part of his efforts to achieve this, he instituted HCMP 2701/2005 against the Defendant.  In these proceedings, he sought, and on 25 April 2006 obtained from Deputy Judge Gill, an order (“the Gill Order”) that:-

“the Defendant do furnish to the Plaintiff within 14 days from the date hereof, the following documents and information which are available to the Defendant as trustee of the Plaintiff under two Declarations of Trust dated the 29^th day of November 1979 and 1980 (“the Trusts”) respectively or alternatively to the extent [that] such documents and information are available to the Defendant by way of diligent demand for the same”.

The order went on to list 10 categories of documents which were to be furnished pursuant to it.

7.  No stay was sought of the Gill Order, but the Defendant did appeal against it to the Court of Appeal in CACV 178/2006.  The Defendant’s appeal met with limited success.  On 10 July 2007, the Court of Appeal (composed, on that occasion, of Cheung and Yuen JJA and Yam J) handed down its judgment allowing the appeal to the extent of reducing the scope of the documents that were ordered to be furnished under the Gill Order.  In its judgment, the Court of Appeal adverted to the fact that as a shareholder of HEL and HICL, the Defendant appeared to be in a position to seek to inspect the records of HEL and HICL pursuant to section 152FA of the Companies Ordinance (Cap. 32).  Apart from varying the Gill Order in terms of the documents and information to be furnished by the Defendant to the Plaintiff, the Court of Appeal’s order (“the CA Order”) also made express reference to the expenses of any application that the Defendant might have to make pursuant to section 152FA, indicating that the Plaintiff should indemnify the Defendant in respect of any such expenses.

8.  The Defendant did not seek to appeal against the CA Order, nor was any stay sought in respect of it.  However, the CA Order was not perfected until 20 August 2007.  Nothing further having been heard from the Defendant regarding her compliance with the order, a copy of the CA Order, with a penal notice endorsed on it, was sent to the Defendant’s solicitors under cover of a letter from the Plaintiff’s solicitors on 15 November 2007.  Further letters regarding service were sent by the Plaintiff’s solicitors to the Defendant’s solicitors on 14 July 2008, 9 December 2008 and 5 February 2009 respectively, in each of which the Plaintiff’s solicitors complained at the lack of progress on the part of the Defendant in furnishing the documents and information called for by the CA Order.

9.  The only steps that the Defendant appears to have taken to comply with the orders made against her are as follows:-

(1) On 30 August 2007, some 10 days after the CA Order was perfected, her solicitors wrote to HEL and HICL requesting documents, and requiring that these should be provided within 10 days.  However, it appears that these letters, which were not addressed to the companies’ registered offices, may not have been received by the companies.

(2) On 9 February 2009, shortly after the last mentioned of the Plaintiff’s solicitors’ letters chasing for action to be taken, her solicitors again wrote to HEL and HICL requesting documents and information.  However, it appears that the companies do not admit having received these letters either.

(3) On 25 February 2009, the Defendant’s solicitors wrote to the Plaintiff’s solicitors enclosing draft applications to be made by the Defendant against HEL and HICL, requesting that the Plaintiff’s solicitors prepare the necessary evidence in support of the proposed applications, and demanding payment of HK$100,000 on account of the Defendant’s costs of making the applications.

(4) On 17 March 2009, the Defendant’s solicitors wrote again to the Plaintiff’s solicitors, stating that if the amount sought by way of costs on account were not received, the Defendant would regard the matter as closed.

10.  On 29 May 2009, the Plaintiff applied ex parte to the Court of Appeal for leave to issue committal proceedings against the Defendant, supported by his Affirmation of the same date.  On 5 June 2009, Cheung JA directed that the application should be dealt with at an inter partes hearing.  This took place on 18 September 2009, with leave being granted on 25 September 2009.  The Originating Summons seeking the committal of the Defendant was issued a few days later on 30 September 2009 – this stated that the Defendant was in contempt of the CA Order “in the respects set forth in the Statement dated 29 May 2009 used upon the application for … leave … a copy of which is served herewith.”  In a further affirmation made on 20 November 2009, the Plaintiff sought to rely on his affirmation made for the purposes of the leave application on 29 May 2009, and deposed to certain further matters which he wished to bring to the court’s attention.

11.  It is also pertinent to note certain further developments that took place after the commencement of these committal proceedings.  These are as follows:-

(1) The Defendant applied to the Court of First Instance in HCMP 641/2009 to bring the trusts before the court for administration by the court and certain other orders.  Although the part of the application seeking an order that the trusts be administered by the court was stood over by Chu J (as she then was) pending the outcome of these contempt proceedings, Chu J did, on 18 June 2010, make an order, which was consented to by the Plaintiff, whereby one share in HICL (which was held by the Defendant on trust for Sean Hotung) was transferred from the Defendant to Sean Hotung.

(2) Shortly before this hearing, HEL was put into voluntary liquidation.  Confirmation of this was obtained from HEL’s liquidators following the conclusion of the hearing.

12.  At the hearing, the Plaintiff was represented by Mr Poll.  He submitted that it was clear that the Defendant was in contempt of the CA Order, in that:-

(1) She had failed to furnish any documents to the Plaintiff within 14 days of the making of the CA Order on 10 July 2007;

(2) She had failed to make any demand (diligent or otherwise) of HEL or HICL seeking production to her of the documents that were the subject of the CA Order within 14 days of its being made; and

(3) She had thereafter failed to pursue, diligently or otherwise, such demands as she did make.  Complaint was directed particularly to:-

(a) the failure to follow up when no response was received to the letters sent to the companies on 30 August 2007;

(b) the failure to take any further steps to renew or pursue such demands between 30 August 2007 and 9 February 2009;

(c) the suggestion in February and March 2009 that the Plaintiff should be responsible for drafting an affirmation in support of the proposed application pursuant to section 152FA of the Companies Ordinance; and

(d) the refusal to take any further steps in relation to the proposed section 152FA application unless the Defendant’s solicitors were put in funds by the Plaintiff to the tune of HK$100,000.

13.  For the Defendant, Mr Chan S.C. took a number of points in answer to the application:-

(1) The charge of contempt as stated in the Originating Summons, referring as it did to “the Order made or varied” by the Court of Appeal on 10 July 2007, was ambiguous and embarrassing in that it failed to make clear whether she was accused of contempt in failing to comply with the Gill Order or the CA Order;

(2) Insofar as such ambiguity was resolved by reference to the Statement used in support of the leave application, and served with the Originating Summons, to mean that it was the CA Order that was relevant, the CA Order did not require the Defendant to do anything, as it did no more than vary the Gill Order by cutting down the scope of the documents to be furnished. Thus, the only order that the Defendant could have been in contempt of was the Gill Order, since that was the only one that required her to do anything.  On that basis, the application should be dismissed, as that was not the contempt complained of, and also because the Court of Appeal, exercising its inherent jurisdiction to punish disobedience of its orders, could not punish someone for disobedience of an order of the Court of First Instance, which the Gill Order was.

(3) Even if the CA Order were to be understood as requiring the Defendant to do the same things as she was required to by the Gill Order, but with a reduced scope so far as the documents to be furnished were concerned, there was no evidence that the Defendant was in possession of any documents which should have been disclosed.  Thus, she could not be guilty of contempt for failing to furnish documents in her possession within 14 days of the CA Order.

(4) So far as the reference to documents and information “available to the Defendant by way of diligent demand for the same” was concerned, this could only be understood as meaning that she was under an obligation to furnish such documents or information as would have been available to her within 14 days had diligent demands been made.  Thus, if it could not be shown that she could (assuming she had made diligent demands for them) have obtained any documents or information from HEL or HICL within 14 days of the CA Order, she could not be in breach of it.

(5) The CA Order did not in terms require her to make diligent demand for documents or information within 14 days of the order being made, so the Defendant was not in breach of it simply for failing to have made any such demands within that time frame.  Even if it might arguably be so construed, she should be given the benefit of any doubt as to its meaning in the context of the present committal proceedings.  Indeed, Mr Chan submitted that the CA Order did not specify any time limit for the making of such diligent demands, so that until a time for compliance was fixed pursuant to RHC Order 45 rule 6, it was premature to bring any proceedings for contempt.

(6) Having regard to the Defendant’s pending application to bring the trusts into court for administration, it would not be appropriate for her to be compelled to continue to act qua trustee, or to punish her for having failed to take the steps in question.

(7) It was perfectly justified for the Defendant to have asked the Plaintiff to provide the evidence for the proposed section 152FA applications, and to be put in funds before commencing them, as the trusts did not have any funds of their own, and the Defendant should not be required, as trustee, to lay out her own monies for the benefit of the trusts.  Further, there was evidence to suggest that the Plaintiff was at one time (in around late 2007) the subject of bankruptcy proceedings.

14.  However, in the course of the hearing, a further point emerged, which had not been raised at the leave hearing (at which Mr Chan did not appear) or in either of the skeleton submissions filed for the Defendant prior to the hearing.  This was that it was not until 20 August 2007 (some 40 odd days after the making of the CA Order), that the CA Order was perfected, and not until 15 November 2007 (nearly three months after that) that the CA Order, with a penal notice endorsed on it, was sought to be served on the Defendant by sending it to her solicitors.  That attempt at service was rendered effective, and the need to further attempt personal service on the Defendant was dispensed with when leave to issue these proceedings was granted (see paragraphs 2 and 3 of the order giving leave to bring these proceedings).

15.  In these circumstances, where the CA Order had not (and could not have) been served on the Defendant until well after the 14 day period relied on by the Plaintiff as the basis for holding the Defendant in contempt of the CA Order had expired, it did not appear that there could be any basis for punishing the Defendant for contempt of an order which had not been served on her when it could still have been complied with.  Having reflected on this point after it was put to him by Yuen JA, Mr Poll very properly conceded that there was no answer to it.  It follows that the Defendant cannot be found guilty of contempt, and that this application cannot succeed.

16.  It is therefore not strictly necessary to deal with the various points that were raised by Mr Chan.  However, for completeness, I shall do so briefly, using the same numbering as in paragraph 12 above:-

(1) I do not think that the first point is well founded.  It was quite clear from the Statement served in support of the leave application, which was served with the Originating Summons in these proceedings, that the Plaintiff was complaining of the Defendant’s failure to comply with the CA Order.  While I would accept that it is desirable, and better practice, for the full grounds on which it is alleged that a defendant is in contempt should be spelt out (if necessary by repetition) in the Originating Summons (see Hong Kong Civil Procedure 2011 at paragraph 52/3/1 and the cases there cited), I would accept Mr Poll’s submission that where the grounds are clear, and the defendant is left in no doubt as to what the charges are, a failure to spell out the grounds in the Originating Summons itself will not be fatal.

(2) Nor do I think that there is any merit in the second point. The CA Order clearly required the Defendant to act within the time frame specified.  Even though expressed in terms of a variation of the Gill Order, it amounted, in my view, to a fresh direction to the Defendant to take the steps called for, within the time specified.  Further, that the Defendant understood this to be the case is, I think, demonstrated by the fact that she did cause her solicitors to write to the two companies, and that this was done just some 10 days after the CA Order was perfected (although this was already late).

(3) The third point, I think, is a good one, and Mr Poll accepted as much, acknowledging that there was no reason to think that the Defendant had any documents which she should have produced.  That being so, the first basis on which the Plaintiff sought to charge her with contempt could not have succeeded.

(4-5)  These points are interrelated.  They are both directed at the suggestion that the CA Order did not require any diligent demand to be made within 14 days.  I am unable to agree with this submission.  It seems to me that in requiring documents to be furnished within 14 days to the extent that they were available by way of diligent demand, the CA Order clearly called for such demand to be made within that period.  In order for documents so obtained to be produced within the time required, the demand itself would have to be diligently made prior to the expiry of the period.  While the Defendant might be able to rely on diligent efforts being made as a defence to any alleged breach of the order if nothing were produced within the 14 day period, it remained necessary for her to commence the process within that time.

(6) I do not think that the Defendant’s application to bring the trusts before the court for administration provides a reason or justification for her failure to take proper steps to comply with the CA Order.  Nor do I think that, if contumelious conduct on her part had been established, that this would provide a reason for declining to punish her.  The CA Order was there to be obeyed, not circumvented by manoeuvring to render it otiose.

(7) As far as the proposed section 152FA proceedings were concerned, leaving aside the fact that these were only prepared (to the limited extent that the Defendant was prepared to do so) very late, it seems to me that there was no justification for demanding that the evidence in support should be prepared by the Plaintiff.  The Defendant, as trustee of the trusts, was a shareholder of HEL and HICL.  She was the party with locus to make the application, and it was clearly appropriate for her to make any supporting affidavits required.  While there might have been some scope for asking whether the Plaintiffs had any input on this score, I do not think that the Defendant could avoid her obligation to make the applications as part of the process of diligent demand by seeking to divert the responsibility for the preparation of such evidence to the Plaintiff.  On the other hand, when it comes to the question of funding for the applications, I would accept that it was in order for the Defendant to seek such funding in advance, given that the trusts had no available funds of their own.  In such circumstances, I think it follows from the requirement that the Defendant should be indemnified by the Plaintiff in respect of the costs of the applications that the primary responsibility for such costs lay with the Plaintiff, and there was nothing improper (leaving aside a possible dispute as to the appropriate amount, and as to whether the amount demanded might have been such as to be calculated to put the Plaintiff off pursuing the matter) in seeking to have such costs provided in advance.

17.  Although I am of the view that this application cannot succeed because of the ground explained in paragraphs 13 and 14 above, it seems to me that, having regard to the Defendant’s apparent reluctance to perform her obligations as trustee of the trusts, and to comply with the CA Order (as to which Mr Chan was constrained to accept that her efforts at compliance had been at best dilatory), it would be desirable for this court to spell out in a fresh order the steps that should now be taken by the Defendant to comply with the CA Order.

18.  In doing this, it is necessary to have regard to the further developments that have taken place since the commencement of this contempt application.

19.  In relation to HICL, Mr Chan pointed out in the course of the hearing that as a result of the transfer of one share to Sean Hotung, the Defendant held only two out of 100 shares in HICL, which meant she no longer had a sufficient shareholding to give her locus to make an application under section 152FA (since that section is available only to a shareholder or shareholders who between them own not less than 2.5% of the issued shares of the company concerned).  Given this situation, it seems to me that there is no longer any point in requiring the Defendant to seek to bring such proceedings against HICL, since they would be doomed to fail.

20.  In relation to HEL, which is now in voluntary liquidation, neither party was able to assist us on the question of what, if any, impact this had on an application under section 152FA.  That being the case, it seems to me that in seeking diligently to obtain the information or documents required by the CA Order, the Defendant should take either or both of the following courses of action, namely, applying to the liquidators in her capacity as a contributory of the company to inspect the company’s books and records, and/or applying for an order under section 152FA of the Companies Ordinance.

21.  In terms of time frame, I would propose that the Defendant should be required, within 28 days of this judgment, to inform the Plaintiff of the applications that she proposes to make, and of the amount of costs (if any) which she seeks to have provided by the Plaintiff on account for the purpose of making such applications.  If there is disagreement as to the amount of costs to be so provided, the quantum of such costs is to be resolved by applying to a master of the High Court within 14 days thereafter for a determination of the appropriate amount.  Upon receiving costs on account from the Plaintiff, the Defendant is to make such application(s) within 21 days thereafter, and to proceed with the same diligently until they are determined. Any documents or information obtained as a result of such proceedings are to be supplied to the Plaintiff within 7 days of their being received by the Defendant.

22.  Although the application has been unsuccessful, having regard to the fact that the ground on which it failed was raised by the court in the course of the hearing, and having regard also to the very limited efforts made by the Defendant by way of compliance with the CA Order, I think that the appropriate course would be to make no order on the application, give the directions indicated in the preceding paragraph, andmake a costs order nisi that there is to be no order as to costsin respect of these proceedings.  So far as the leave application is concerned, although it was ordered that costs should be in the cause of these proceedings, the position at the end of the day is that neither party has really succeeded, so that each party should therefore bear his or her own costs of that application also.